Home sales down 2.8% in January

Tuesday, February 28th, 2006

Noelle Knox
USA Today

WASHINGTON — Sales of existing homes fell for the fifth month in a row in January, and consumer confidence slid to a three-month low as Americans worried about job prospects and their income potential.

Existing home sales dipped 2.8% last month to a seasonally adjusted pace of 6.56 million, down 5.2% from January last year. The news followed a government report Monday that said new-home sales dropped 5% last month to the lowest level in a year.

“The primary factor driving down the market were condos and co-ops, which fell 10.6%,” said Phillip Neuhart, an economic analyst at Wachovia. “That’s the real story here, the condo market, at least in January, was quite slow and has been trending downward since summer.”

Single-family home sales, by contrast, were off just 1.5%.

Regionally, home sales suffered most in the Northeast, falling 10%, followed by a 7.7% drop in the Midwest, and a 3.5% dip in the West. The only strong market was in the South, where sales rose 2.6%, according to the National Association of Realtors, which released the data Tuesday.

The rising number of home shoppers who aren’t buying may be in part because fewer people can afford the median-priced home. That price — half cost more, half less — was unchanged last month at $211,000, 11.6% higher than in January last year.

The inventory of homes for sale rose slightly and now stands at a 5.3-month supply.

Home shoppers’ reluctance also may be because of concerns about financial security. The Consumer Confidence Index fell in January to 101.7 from 106.8, the Conference Board said Tuesday.

The drop in home sales came despite record warm weather and cash and give-away incentives from builders. “Imagine if the weather had been terrible,” Neuhart said.

Sales of both existing and new homes set records for a fifth year in 2005, but analysts believe sales of existing homes will fall about 5% this year as rising interest rates cut into demand.

The five consecutive declines in existing home sales represented the longest stretch of weakness since a stretch of six monthly declines from July through December of 1999.

Analysts say the rising supply of unsold homes will likely slow the rapid increase in home prices of recent years. Instead of double-digit gains, Lawrence Yun, senior economist at the Realtors, said he was looking for a more moderate rise of 5% in prices this year.

The big concern has been whether the slowdown in sales would cause home prices to come crashing back to earth. But most analysts believe the housing market is headed for a slowdown but not a crash.

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